THE Archbishop of Canterbury has expressed his concerns over reports revealing the Church of England has been indirectly investing in 'unethical' payday lending firm Wonga.

Justin Welby is unhappy that Church's funds are being funnelled to Wonga

Archbishop Justin Welby told BBC Radio 4's Today programme: "Now, it shouldn't happen, it's very embarrassing, but these things do happen. We have to find out why and make sure it doesn't happen again.

"I was irritated for a few minutes but, you know, these things happen. I understand the business, it's an incredibly complex business."

Reports have shown the Church of England indirectly investing in the payday lending firm

Mr Welby said he was disappointed that Church funds were being sourced into Wonga.

"They shouldn't be investing in Wonga. We don't think that's a good thing," he said.

Last year, payday lenders such as Wonga were placed on a list of 'unethical investments' by the Church.

The Church's website outlines that 'ethical investment restrictions apply' to companies that make business from pornography, tobacco, gambling, alcohol, military products and services, high interest rate lending and human embryonic cloning.

Mr Welby has tried to offer some alternatives to better the Church's finances

They shouldn't be investing in Wonga. We don't think that's a good thing.

Archbishop Justin Welby

"We're allowed to invest in a company where less than 25% of its business is in this area.

"My own view is that that is probably too high a level. It is an ethical investment advisory group, I don't have authority to tell them what to do," said Mr Welby.

The Financial Times reported that the Church's pension fund has made investments in Accel Partners, a company that led Wonga fundraising in 2009.

However, the Church's pension fund claims it bans business with companies that take part in payday lending.

A Lambeth Palace spokesperson thanked the Financial Times in a statement for "pointing out this serious inconsistency of which we were unaware".

Mr Welby specified that around £75,000 out of a totalled £5.2 billion investments are indirectly invested in Wonga but insisted no investments should be made according to Church policy.

Most Reverend Welby previously told Wonga that the Church would try to drive it out of business by helping boost competition between credit unions before it later emerged that the Church has been investing in funds that provide money for the UK-based money lending firm.

Yet Archbishop Welby claims that he never targeted Wonga directly: "I never took on Wonga in particular. The context was talking about the entire payday lender movement. Wonga is actually a very professionally managed company."

Archbishop Welby claims he never directly attacked Wonga

The Archbishop took the heat off of Wonga to suggest a new strategy for the Church's investments: "We need to provide a proper alternative to these very, very costly forms of finance. The worst people are not Wonga. There are plenty of others much worse."

Chief executive of money lending firm Wonga, Errol Damelin, who has been called "a very clever man" who runs his money-lending firm "extremely well" by Archbishop Welby, has backed the need for consumer choice.

Mr Damelin later said: "There is mutual respect, some differing opinions and a meeting of minds on many big issues.

"On the competition point, we always welcome fresh approaches that give people a fuller set of alternatives to solve their financial challenges. I'm all for better consumer choice."

Archbishop Welby, who sits on the Parliamentary Commission on Banking previously lobbied for a cap on high interest rates devised by loan companies.

And earlier this month he launched a new credit union aimed at clergy and church staff to encourage more people to borrow money at lower rates of interest.